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- [00:00]
Duke Energy Representative
At Duke Energy, we're making smart investments to add enough capacity to power 10.5 million more homes over the next five years. It's all part of our commitment to deliver the reliable energy America needs. Learn more at duke-energy.com poweringamerica
- [00:18]
Bloomberg Audio Studios Announcer
Bloomberg Audio Studios Podcasts Radio News. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch US live on YouTube.
- [00:40]
Podcast Host (Kelly)
The latest from US Central Command is that the US blockade is over. It has been lifted on all Iranian maritime traffic. So the process here is beginning after the signing of the Memorandum of Understanding between the US And Iran. That, of course is aimed at fully reopening the Strait of Hormuz. Part of that was that the US Blockade would end. The other part, of course, is the clearing of mines in Iran, allowing ships to pass through, being harassed and without having to pay tolls. The question, of course, is whether or not that no toll agreement that the Iran has agreed to for now is going to extend beyond this 60 day period. And our colleague Jen de Louis actually pressed Vice President Vance about that specifically as he was briefing from the White House briefing room earlier today. This was his response.
- [01:26]
Vice President Vance
That's not about tolling. That's about ensuring that the straits are never used as a choke point for the global economy ever again. It's frankly not what the Iran, it's not what the Omanis want. It's not what the GCC wants either. So what we're going to do, of course working with our allies in the region is to ensure that that is reflected in the final deal. And if that's not reflected in the final deal, there's not going to be a final deal.
- [01:50]
Podcast Host (Joe)
Let's talk about the potential for a final deal with Mona Yakubian, Director, Senior Adviser of the Middle East Program at the center for Strategic and International Studies, CSIS Mona, welcome back to Bloomberg TV and Radio. It's great to have you. What could be accomplished in the next 60 days here that can fill in some of the blanks, or do you see that timeline having to be extended?
- [02:14]
Mona Yakubian
Well, I think lots of questions about what actually can be done in 60 days. Certainly the issue that's going to now be front and center is Iran's nuclear ambitions. Very little really addressed in the MoU. Let's not forget this was the key driver for getting into the conflict in the first place. And there are several outstanding issues. What happens to the highly enriched uranium that Iran continues to possess, Will it agree to an enrichment freeze and for how long? And what about the question of inspections which will be necessary to ensure any deal is abided by. Those are some big questions, Joe, that will need to be addressed. Hard to see how those that can all get done in 60 days.
- [03:04]
Podcast Host (Kelly)
Well, so as we consider the nuclear question specifically, Mona, Vice President Vance was also asked how this deal is ultimately going to be better than the JCPOA agreement that was reached during the Obama administration. He said two things. One being the US's position of strength, the other being that our Gulf allies like it. And I wonder if you do get the sense that the Gulf is satisfied with how things have turned out here.
- [03:32]
Mona Yakubian
I mean, I think on the one hand, Gulf countries are relieved that the shooting has stopped and the strait is opening back up. On the other hand, I think they're very concerned that the MOU leaves in place a very empowered Iran and doesn't address issues that are of key concern to them, namely Iran's ballistic missile capabilities and drone capabilities. Let's not forget they really bore a lot of the brunt of this kinetic action by Iran and also the question of proxies and support for groups like Hezbollah in Lebanon and the Houthis in Yemen.
- [04:14]
Podcast Host (Joe)
A lot of Senate Republicans have been criticizing this deal and many of them are looking specifically to Iran's ability to enrich itself not only through this investment fund, but the actual sale of oil with the lifting of sanctions. To what extent are we empowering Iran economically? And is this the best day that's happened in Tehran in some time?
- [04:39]
Mona Yakubian
I mean, I think they're probably doing a bit of a victory dance in Tehran given the terms of this mou. It allows provides economic rewards to Iran just for signing the mou. The immediate waivers, you know, temporary but immediate waivers of sanctions on oil, on banking, on insurance. The blockade has been lifted, as was noted by centcom. So Iranian oil is flowing again. And there's also the potential for the unfreezing of billions of dollars of Iranian frozen assets. All of that is in the MOU. That doesn't even begin to get to this $300 billion reconstruction fund, which, to be fair, hasn't yet been initiated. We don't know who would contribute, under what circumstances, et cetera. Likely investment. It wouldn't be aid, but still these are a lot of significant benefits to Iran. And the nuclear issue hasn't even been touched.
- [05:41]
Podcast Host (Kelly)
Well, so as we consider the touching of the nuclear issue, I know we spoke to how Gulf states feel about it. But I also wonder, Mona, if you really think there's going to be a chance for any party, whether it's another Gulf state, whether it's the United States, whether it's an international body like the iaea, to be able to to accurately verify what is going on with Iran's nuclear program if we're going to have access to credible information at the end of this deal, assuming one on the nuclear program can be reached.
- [06:14]
Mona Yakubian
Great question, Kayleigh. And that question of inspections and the ability to verify that Iran is actually adhering to a deal has really not received the attention it deserves. Iran, if anything, has even more sophisticated enrichment capabilities and than was the case during the jcpoa, meaning it can enrich uranium faster. That means that the path to a nuclear weapon has been shortened and yet we don't really know what kinds of inspection elements would be part of the deal. And let's not forget this regime in Iran is a harder liner regime. It is more connected to the IRGC and they may be even less willing to to countenance somewhat intrusive inspection regime which is going to be needed in order for the deal to be to be well verified.
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Podcast Host (Joe)
How are you thinking about Israel and our relationship with Benjamin Netanyahu today? Mona? The vice President was asked about this with Lebanon being an important component of the deal, reports that Bibi is fuming. He said it's not about Bibi. It's people within Bibi's cabinet who have attacked the deal and are in some ways, in some ways very personally attacked the President. He had some advice for them. He said I wouldn't be attacking the only powerful ally that I have anywhere left in the entire world. What happens to our relationship here?
- [07:43]
Mona Yakubian
It's a really good question, Joe. I mean, this is a strong and an enduring partnership alliance with Israel. But we have seen some real points of tension and Lebanon really resides at the crux of it. The President has made clear that he wants to see some kind of a deal. Let's not forget there are direct talks that will start again this coming Monday between the Israel and Lebanon mediated by the United States. So the President is putting his own personal reputation behind some kind of a success between Israel and Lebanon. And every time that Israel has, you know, undertaken significant strikes on the Beirut suburbs, a real provocation, the President has gotten very angry and we've heard reporting of that and he has as much as said so. So I think this is going to be an area to watch in the coming weeks. Probably the key area if there's anything that can derail the cease fire, it is the potential for a resumption of conflict in Lebanon.
- [08:51]
Podcast Host (Kelly)
All right, Mona Yakubian, director and senior advisor of the Middle East Program at the center for Strategic and International Studies, thank you so much. Of course, we did hear from Vice President Vance as well on Israel suggesting that America, the global superpower, is the only one, only ally Israel really has right now. Some pretty sharp and pointed words that he targeted specifically at members of the Israeli cabinet who might find themselves critical of what the Trump administration is doing here. And what the Trump administration is doing here, Vice President Vance suggested, is going to turn out as a win win for the American people either way. This is how he phrased it.
- [09:26]
Vice President Vance
If the Iranians don't change their behavior, their military and their nuclear program is still destroyed. If they do change their behavior, then they are going to have a transformative relationship with the Middle east and the Middle east will have a transformative relationship with the people of Iran. That's a win for the American people and for the president of the United States, regardless of which option the Iranians ultimately choose.
- [09:51]
Podcast Host (Kelly)
So let's get into this now with our political panel. Maura Gillespie is with us. Bluestack Strategies founder and Republican strategist alongside Democratic strategist Arshi Siddiqui. Bellwether Government Affairs CEO Maura, as we heard, Vance here, and welcome to you both. Vance describing a win for the American people and for potus. Are they one in the same? Do you think the American electorate and the president ultimately do want the same outcomes achieved here?
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Maura Gillespie
You know, I think it's hard to say that with polls showing that the American people by and large are not pleased with this war, don't really fully understand what we're doing. Again, if we're, if he's now saying that ballistic missiles is fine for them to have, when weeks ago he said that was all destroyed, I think that there's just been a lot of confusion and there really hasn't been a good faith effort to explain to the American people what we're doing. And at the end of the day, this is just going to be problematic for the Trump administration and really problematic for Republicans in Congress to get by this without having answers to as many questions they have. I also think that with costs as they are, yes, they say gas is going down, but will it really? And how much and how quickly? And so those are questions that maybe they can't answer right now and it's concerning to not have them for constituents
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Podcast Host (Joe)
who ask so what the President posted a little while ago, just in the last hour, he writes, there is no $300 billion payment to Iran by the US that is fake news. This is untrue. Social, he writes, all there is for the US Is success, lower oil prices and victory. Check out the stock market. Democrat propaganda at play. So we turn to our Democrat RC $3.99 on average today for a gallon of gas. If gas prices keep dropping, will Americans be asking hard questions 60 days from now?
- [11:38]
Arshi Siddiqui
I think it's more than gas prices, number one. Number two is that we have seen the way the markets, both stock market and oil market. People want to believe that we're getting close to the end. So I think the proof will be as this plays out in the next 60 days in terms of the hardest questions are still need to be answered, and we need to still see where that goes. But on gas prices, there's also high prices because of tariffs, higher health insurance because of Republican policies, inflation, the cost of living. The issues go on and on and on. And so it's a more holistic conversation. But I do think that this, this last chapter with this MoU does reflect this need by the White House to get back to domestic priorities. And I think that's probably why we're seeing such a rush to declare this mou, this deal, rather than being a path towards a deal.
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Podcast Host (Kelly)
Well, so as you talk about the holistic picture, Archie, is that how Democrats are now going to have to frame things heading into November? They can't just be like, look at the price at the pump. You have to go a bit deeper than that. I just wonder if the job gets a little harder.
- [12:39]
Arshi Siddiqui
You know, it's interesting you say that because all the Democrats I've been talking to have been saying this across the country and to their constituents in their districts. So. But it hasn't been as covered because obviously we have a lot of news and a lot of constant volatility. So I think that it's the same message that will continue. And I think Democrats are very focused on their districts fighting for their constituents back home. And we'll see more of that.
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Podcast Host (Joe)
The Iran hawks in the Senate, Republicans, Maura, are making a lot of noise. And I'm wondering if you think this could, in fact, impact outcomes when you hear Ted Cruz say, giving billions to theocratic lunatics who want to murder us is not a good idea. Bill Cassidy, the worst foreign policy blunder in decades. Mike Rounds is questioning why we would allow Iran to have ballistic missiles. Does this chorus start to die? Out in the next 60 days, or is the president listening?
- [13:33]
Maura Gillespie
I don't know that the president is listening, but I would hope that they're speaking to their constituents. You know, if they are getting calls in their office saying that they, their constituents are vehemently opposed to what's going on in Iran, the kind of initial start of this with Israel, then yes, they should be speaking out about it because that's who they represent. You know, for all that's been said about how strong of a hold Trump has on the Republican Party, the Republican Congress, I think that there are these cracks happening and you're going to see more and more of them when they realize that their election, their reelection bid is deeply in trouble, is in deep trouble right now because of the president's low approval, but also because they're not listening to their constituents. They're trying to appease one person as opposed to the 700,000, you know, people in their House district or the people they represent, their state. And so I do think that while the president may continue to do what he feels is going to be best for his legacy, his own personal ambitions, members of Congress need to be reporting to the people who elect them.
- [14:33]
Podcast Host (Joe)
Great panel today, Maura Gillespie and Arshi Siddiqui. We thank you so much for the insights. We have a lot of questions still to answer, but we need to start asking them. Stay with us on balance of power. We'll have much more coming up after this.
- [14:48]
Duke Energy Representative
At Duke Energy, we deliver reliable energy that powers lives, grows businesses and transforms communities. That's why we're making smart investments to add up to 14 gigawatts of new capacity over the next five years. That's enough to power 10.5 million more homes. Putting customers first, advancing American progress, powering the next generation. Learn more@duke-energy.com Powering America.
- [15:17]
Bloomberg Audio Studios Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon, Amazon, Alexa from our flagship New York station. Just say Alexa, play Bloomberg 11:30.
- [15:36]
Podcast Host (Kelly)
The bond market, especially fascinating in the last 24 hours. In the aftermath of the first Fed decision made under the new chair, Kevin Warsh, the market clearly was expecting something a little bit more dovish than what it received in the form of a dot plot in which about half of the members of the FOMC suggested they would like to see or expect to see a rate hike this year. That's why we saw the two year yield yesterday jump to the highest level since April of 2025. But of course we are seeing yields a bit lower today. Of course, as I reference that dot plot we got yesterday, Kevin Warsh himself did not contribute a dot, as we know. And as he discussed in the press conference, he isn't really a fan of the Fed providing forward guidance. He also seems to suggest that financial markets shouldn't need forward guidance from the Fed. Maybe the guiding should be going in the other direction. Let's remind ourselves of what the chairman said at the press conference yesterday.
- [16:32]
The more that markets are paying attention to what's happening in the real economy, deciding what's good data and what's less good data, the more financial markets can price what they believe is the most likely. Financial market. Prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information and we're being blind to it.
- [17:03]
So let's talk to one former central banker, the former vice chair of the Federal Reserve, in fact, and the former director of the National Economic Council under the Biden administration. Lael Brainard is joining us now on Bloomberg TV and radio. She's now distinguished fellow at the Georgetown Soros center for Financial Markets and Policy. Welcome back to Bloomberg, Director. It's good to see you. I wonder what you made overall of Kevin Warsh and his first press conference yesterday. Did he surprise you?
- [17:31]
Lael Brainard
Well, it was a very interesting press conference. He stayed true to his vow not to really communicate his own views about policy or any sense of where policy might be going. The result of that was he really let the summary of economic projections do all the talking. And I think the markets really reacted because you had half of those projections didn't include his projection, but half of those projections saying that inflation is going to be a lot higher this year, ending the year at 3.3% core and that would warrant one or more rate hikes. And that's why you saw that big move in the two year. The other thing that was notable is that both in the statement and in his discussion, he really emphasized price stability and made it sound like a one mandate central bank. So those were the things that I think moved the direction of the market in a very hawkish shift. That's not actually what his comments, the sort of subtext suggested, but those were the main messages.
- [18:42]
Podcast Host (Kelly)
Well, so talk about his comments on what we just heard him say about financial markets receiving guidance from the Fed in particular I wonder if you have sympathy with the view that maybe the market should be the one interpreting data on their own, rather than interpreting the Fed's interpretation of said data.
- [18:59]
Lael Brainard
Well, I think the difficulty here is that the market needs to and the public need to understand, not forward guidance in the sense that I think he is objecting to, which is suggesting here's what our action will be if inflation and unemployment come in at these levels, but at least a sense of how the Fed's policy is seeing current inflation, unemployment. And that gives both the markets and the public a sense of where policy might be heading. So what was interesting yesterday is he really didn't even want to provide a sense of what a lot of people call a reaction function. But his own biases seem to be sort of subtext in some of his comments. You know, he noted that half of the people who did submit projections didn't see a rate hike this year. He said there was no cruel choice between inflation and the labor market. So there were a few things that he said that might have pushed back in the other direction.
- [20:11]
Podcast Host (Kelly)
Well, and of course, as we continue, consider what is said or what will be said going forward, we know there's going to be a whole task force on communications. There's going to be a lot of task forces under this new chairman. Has he asked you to sit on any of them? He said he was still making calls.
- [20:25]
Lael Brainard
No. I think what was interesting about the task force is we knew there would be a review of balance sheet policy. We knew there would be a review of communications. But I think what was interesting is the task forces on data sources, the task forces on the inflation framework, and the task forces on productivity all could be ways that even while emphasizing price stability, he tries to move the committee in a more dovish direction. So those were the areas that I think we just don't know where he's headed. But what we do know is that half of the committee is very worried about inflation. And, and that is consistent with the data we've seen.
- [21:11]
Podcast Host (Kelly)
So let's talk about that inflation framework because he was asked specifically whether the Fed is going to be reconsidering the 2% target. And while he reiterated he's more focused on the two, not what comes after the decimal point, he also said he sees no reason to change from 2% right now. Do you anticipate he could get there?
- [21:29]
Lael Brainard
So what was interesting is that there are a number of things he said which suggest that he may not wish to stick with core PCE as the inflation target. He's talked about trim mean inflation when he is now referencing a task force on the inflation framework. That too provides some wiggle room for potentially moving away from getting core PCE back down to 2%. And his comments on what's on the left side of the decimal point suggested that anything from 2.5 down to 2 might be acceptable. So all of those gave some suggestion that he might be looking for wiggle room. And that is not what we saw from half of the members who submitted projections where they saw inflation, core inflation still at 3.3% at the end of this year, sixth year in a row of inflation well above target. New inflation pressures coming not just from oil but now from AI and saw the case for a rate hike or more.
- [22:35]
Podcast Host (Kelly)
Well so on those inflation pressures we obviously now have at least the beginnings of the reopening of the Strait of Hormuz via this memorandum of understanding between the US and Iran. The US naval blockade is now officially over and Iran is supposed to allow the toll free transit of vessels over the next 60 days. How quickly is that able to translate into lower energy prices that we have seen bleeding into other core inflation metrics?
- [22:59]
Lael Brainard
So I think the question is when will consumers really see it at the pump? Because that has a huge effect on consumers perceptions of the economy. And right now consumer sentiment is at rock bottom because they are so unhappy with high inflation. It will take some time. Buffers have really been used up during this transitional period. It will take time for production to come back online for that straight of hormones moves to fully clear. And so how much it still is going to move and lift core inflation. I think there's still some sense that core inflation could be given an uplift from oil for at least several months. And of course we now have inflation coming from AI in electronics. We heard Apple's announcement and so these are successive waves of inflation that are really likely to keep core inflation high through the end of the year.
- [24:01]
Podcast Host (Kelly)
I do want to ask you about AI, but the way you're talking about inflation right now leads me to believe you might have been one of those dots that sees a rate hike by the end of this year yesterday. Is that the case?
- [24:10]
Lael Brainard
So I believe that conditions have really changed than we saw when the Fed started doing its easing cycle back in the fall. We've seen a tightening in the labor market, but what is really noticeable is that core inflation was actually rising before the oil shock. And we are now seeing new sources of core inflation from the AI data boom. And that's on the demand side. And so for all those reasons, given that we've had five years of above 2% inflation, I would probably be quite cautious about inflation, insisting that the Federal Reserve has to get inflation back to 2%.
- [24:53]
Podcast Host (Kelly)
So on AI and we are actually going to speak with the chair of FERC up next on this program about data centers connecting to the grid, what it will all mean for ratepayers. Are you in the camp that sees AI firmly as inflationary because of higher energy costs, because of the actual infrastructure buildout we are seeing, or that it eventually will be disinflationary because of increased productivity? Warsh's answer yesterday was I have a task force for that.
- [25:18]
Lael Brainard
So both I think are likely to be the case. It's clear today that AI is pulling forward demand for this just incredible data center build out levels of investment that are equal to total fixed investment, nonresidential in past years devoted to data centers. And of course that means chips and, and those are chips that would otherwise have been going into electronics and other parts of the economy. So because it's really pulling forward demand, we're seeing a near term inflationary impulse and that is likely to lift core inflation, you know, on the back half of this year. That's fully consistent with AI becoming a disinflationary force as business models really transform form and the broader economy starts to really become more productive as a result of using generative AI.
- [26:21]
Podcast Host (Kelly)
In our final 30 seconds here, we're also obviously seeing AI help bolster the stock market and therefore the wealth of people who find themselves at the upper end of the K. What happens if these market gains start to dissipate at some point?
- [26:34]
Lael Brainard
Well, I is really driving the stock market. There's a lot of credit in the AI space. There's a lot of leverage. And so if we see a really big piece of data that suggests that revenues are not going to justify these valuations, you could see a pretty big correction.
- [26:57]
Podcast Host (Kelly)
All right, well, we're not seeing it today, but we'll see if that is going to happen sometime in the future. Lael Brainard, formerly of the Fed and of the National Economic Council. Thank you for being here. On balance of of Power on Bloomberg TV and Radio.
- [27:11]
Podcast Host (Joe)
Stay with us. On Balance of Power. We'll have much more coming up after this.
- [27:18]
IBM Representative
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- [27:49]
Bloomberg Audio Studios Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [28:06]
Podcast Host (Kelly)
It is of course a shortened week for financial markets, even if this week in financial markets certainly did not feel short because we have seen a lot of volatility. Just take a look at the NASDAQ 100, which as Charlie just mentioned, is higher today, about two and a half percent higher at this point in the session. It was only down 1% yesterday, down 2% Tuesday, up 3% on Monday. We are seeing a lot of big swings in benchmarks such as this and a lot of big swings, of course, in stocks like Space X after a multi day boom post ipo. Now coming back down to earth, no pun intended, a little bit as well. So let's get into all of this now as we turn to Christina Kino, who is also up in New York where of course she helps us with the Markets Live blog. Christine, I just want to think about the volatility in tech in particular. It's like one day we think, okay, trade is going great, chip stocks are rallying. The other day, everybody gives up on it. And we see pressure in those stocks most acutely. What exactly is the narrative here?
- [29:12]
Christina Kino
Well, Kelly, it really is sort of a choose your own narrative sort of environment for markets at the moment. And you know, you mentioned, of course, whatever's happening with the air trade and then of course their geopolitics with the latest twists and turns when it comes to the status of the US Iran deal. And then of course yesterday we got Kevin Marsh's Fed. And it seems to be a new era for the Fed where they're really focusing on price stability, adding to those list of narratives for markets. And that's probably why we're seeing revival in volatility here because now it's not just one, it's not just two. It's at least three catalysts battling it out in markets at the moment. And you know, I can see very easily how investors are now trying to make sense of what is a new era for the Fed, potentially rate hikes coming by the end of this year and into early next year and how that factors into all the other catalysts that have so far been moving markets
- [30:05]
Podcast Host (Kelly)
this year well, so let's consider that potential rate hike for a moment because you might think that you would see see certain moves within interest rate sensitive sectors or stocks with super high multiples might be struggling with that notion. Is that actually what's being borne out right now, Christine?
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Christina Kino
Well, Kelly, I'm looking at the Philadelphia stocks index, of course, and just by looking at the continued rally there, the answer to your question would be no. It seems like chip stocks are really still very much in vogue and that's driven much of the reverse revival in equities today. But you know, we were pointing this out earlier on the Markets Live blog, Chip stocks, the rally that we've seen over the past three years came at the tail end of a Fed tightening cycle and it was a time when rates, interest rates were starting to pull back. But now this is going to be a new era. It's unchartered territory for, for chip stocks because they're potentially about to see higher rates, potentially more rate hikes than what's currently priced in the markets. And it'd be interesting to see if the durability in the rally last through all of that.
- [31:12]
Podcast Host (Kelly)
Yeah, well, certainly we didn't see a lot of durability in Space X's post IPO rally down for a second day. Christine, just quickly, is this some natural reversion back to a more. I don't even know if I can say appropriate valuation because I think we've thrown that entire conversation out with the, with the bathwater here with this stock now being one of the largest in the world. But what do you attribute these two days of declines to?
- [31:40]
Christina Kino
I mean, listen, every IPO experiences this, right, once it starts trading for a full week, which is what we're seeing with SpaceX still on track to end about 35% higher than its IPO price at $135. And don't forget, once it's, it's included in NASDAQ 100 after 15 days of trading, there's going to be a natural boost to shares again because a bunch of passive investors are going to have to own this stock automatically. So the story's not over for SpaceX, that's for sure.
- [32:09]
Podcast Host (Kelly)
Well, yes, that is certainly the case. Christina Kino with us from New York, thank you so much. Of course, SpaceX is still trading more than $40 above that $135 IPO price. Right now we're just south of $180 a share. A lot of that valuation, of course, based off of the artificial intelligence aims of this company. With the idea of orbital data centers, compute power in space. It's the ambition. We aren't there yet. Therefore, we have a lot more data centers to build out here on Earth and in the United States specifically. And a lot of questions come with that, including how to power them, how to pay for what powers them, and how exactly these data centers can get connected to our grid. Currently, it's a pretty slow process, but the federal ferc, which of course is the Federal Energy Regulatory Commission, today's proposing a rule to speed this up. And I'm pleased to see the chair of FERC is with us now. Laura Sweatt is here with us in our Washington D.C. studio. Chair, welcome to Bloomberg TV and Radio. It's good to see you. When we consider the proposals you're making today, the accelerating of this grid connection process, something that could take years under the current regime. How quickly might this be able to happen now?
- [33:25]
Laura Sweatt
Well, under my leadership, the Federal Energy Regulatory Commission is going to ensure that our grid, which is very slow moving and has many barriers to it, is going to be accelerating our country into the future. And that means faster study timelines, faster connection of data centers, faster connection of generation that will power these data centers. But we're going to do the all, all of that while protecting the American ratepayer and ensuring that no American will pay an unfair cost for data center connection.
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Podcast Host (Kelly)
Well, so talk to us about how you're going to achieve that component. Who ultimately is the bearer of the cost here? Because there are costs associated.
- [34:07]
Laura Sweatt
Yes, there are billions of dollars of costs associated with the data centers. And this is something that is very personal to me. I am the daughter of a Vietnamese immigrant and a 40 year civil servant. And my parents realized the American dream. And I very much felt the stress of the cost of utility bills as I was growing up. And that is something that I am vigorously safeguarding as the head of this federal agency that is tasked with ensuring that the cost of electricity in America is fair. Now, the President led a ratepayer protection pledge which many of the hyperscalers have adhered to or pledged to. And now it is upon FERC in our federal jurisdiction to ensure that the hyperscalers are held to that agreement that they made with the President. And we at FERC ordered today part of our order in the markets across the country, which each received individual orders tailored to how they are run. We are requiring more cost transparency on what is required to connect the data centers and the generation that they need than we have ever required before. And that transparency will make it such that no one can point a finger and say, well, we don't know how much it costs to the data center. We don't know how much the hyperscalers need to pay. Now we are going to have all of the data that we need, how much it costs to upgrade the grid to connect them, and they will pay everything that is required to get them the power that they need. And the American ratepayer will not absorb that cost.
- [35:38]
Podcast Host (Kelly)
Well, this is obviously a big change that you're looking to make. It's relatively sweeping. And I wonder if we should read this as a signal that your agency is going to have a more interventionist approach to this going forward.
- [35:53]
Laura Sweatt
We are going to vigorously protect Americans more than we ever have before. And that is incredibly important. I don't want to say that we are. It's just a cost, really. There is a way to integrate the data centers so that they can give the massive money injection into our economy that they are prepared to make with their investments of keeping what they're doing in our country. And we're just going to make sure that everything is fair. And I want to just make a point here, which is what FERC is doing is not limited to data centers. There's also massive industrialization that we are looking at. And that is another massive injection of money into our economy. And we need to make sure that people and investors are comfortable making that investment in our country. And FERC has a mind to ensure that there are clear rules and predictability so that the investors have that confidence.
- [36:48]
Podcast Host (Kelly)
Well, so how should an investor in a hyperscaler, someone who's just considering what this means for a company like Amazon or Meta, consider what you are doing here?
- [36:57]
Laura Sweatt
Well, I think if I were them, I would view this as, for the first time, the electric regulator in this country is very aware of the economic benefit that we may give to our country. Because data centers are the intersection of not just energy, but also national security and jobs. And the same is true of industrial manufacturing. And the fact that today we are requiring the markets across the country to have come back to us with very clear rules on how they are going to study what the data centers need, come up with transparency and tight timelines for them to come online. The investor should see that as a favorable regulator who is motivated to move quickly and ensure that everyone knows exactly what the rules are and how we're going to do this.
- [37:47]
Podcast Host (Kelly)
Well, what about a resident in Loudoun County, Virginia, for example, just a few miles outside of the District, who is considering not only what this means for their pocketbooks and the utility costs that you were speaking to, but also wondering what this will mean for their reliability and simple access to power. Are grids able to keep up with with this kind of scale of data center build out that we are seeing?
- [38:11]
Arshi Siddiqui
Yes.
- [38:12]
Laura Sweatt
Well, I actually grew up just a few minutes from Loudoun county and driving around data center alley, reliability is critical. And I will answer you frankly, the way that our electric grid is now, with the generation that we have today, it is not going to work. That is why we have to be aggressive. We have to look at everything with fresh eyes and make interventionists and unprecedented action, which is what FERC did today. And I'm so proud to say that. And we are requiring the markets to actually look at what generation is necessary and come back to us 30 days from now and give us reports on how they're going to handle this generation issue. Now getting to the local level and your question of Loudoun county for example. So Americans bills are about one third of them are under FERC's federal jurisdiction. The rest of that bill that you pay is depending on what state you're on the cost of providing power and additional state riders and programs that will inflate bills bills. So unfortunately I don't have any control over that, but I do have a control over 1/3 of American spills and I guarantee that we are going to drive that as low as possible.
- [39:21]
Podcast Host (Kelly)
Just in our final moment here, Chair, as you suggest that at least with the current state of play this wouldn't work. Is our grid able to act fast enough to make the state of play ultimately work for all this build out or do you see current data center build out projections as potentially being unrealistic and going to have to be scaled back some as you consider that reality?
- [39:41]
Laura Sweatt
Well under the rules before today, no, I don't think the grid could act fast enough but I sure giving everything that I have into trying to get it there. And we are pulling all the stops down and working with all our state and federal partners to ensure that our country can satisfy this and push us into the future and success.
- [40:00]
Podcast Host (Kelly)
All right, well it's great to have you on the day that the commission is taking that step. That is the chair of the Federal Energy Regulatory Commission, Laura Sweatt, who's here with us in our Washington D.C. studio, another Nova girl like myself as we consider what all of this means for Loudoun county and beyond. Certainly Joe, Matthew and myself have heard a lot about data centers. The build out the costs associated with them and how it's factoring voters thinking as they head toward the midterms in November. We heard a lot about this in Georgia, too, another state that focuses closely on this issue.
- [40:32]
Podcast Host (Joe)
Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already, Apple, Spotify, or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at Noontime Eastern@Bloomberg.com
- [40:46]
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